More people should be helped to access cover for financial shocks, says FCA

The City regulator has called on the insurance industry to help more people access products that support them and their families if they become critically ill or die.

The Financial Conduct Authority (FCA) said that more than half of adults do not hold a pure protection product, even though many could benefit from them. The regulator said it wants to help close the gap.

Pure protection products help people deal with financial shocks. They typically include life insurance, which pays out in the event of death or a terminal illness; critical illness cover, which pays a lump sum if the policyholder is diagnosed with a specified serious illness; and income protection insurance, which provides regular payments if someone is unable to work due to illness or injury.

The interim findings of the FCA’s competition review of pure protection products found that, for people who have taken out protection insurance, the market mostly works well.

There are a wide range of products, most consumers can claim when they need to, and the costs of cover have remained stable in the last few years, the regulator said.

It said research suggests that the gap exists because consumers are not aware of their needs and are not prompted to consider them. Other issues include ability to pay, misunderstandings about the product or improvements needed in the sales process.

The regulator said it is exploring what more can be done, to better support consumers.

Graeme Reynolds, director of competition and interim director of insurance at the FCA, said: “These insurance products play a vital role in helping families manage some of the most difficult experiences in life.

“While competition in the market is mostly working well for consumers, many more people could benefit from protection. We will work with industry to reduce this gap, to help consumers navigate their financial lives.”

The FCA said it welcomes feedback on its interim findings by March 31. A final report will be published in the third quarter of this year.

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